Catching up on broadband

The govt can invest some of the Rs 1,00,000 crore from the spectrum auctions to help India catch up on broadband, says Shyam Ponappa in his latest article published in the Business Standard on July 1, 2010.

When it comes to broadband, India is “notably lagging its peers”, to quote Booz & Co, an international consulting firm.1 Its report recounts our pathetic coverage — less than half the anticipated 20 million — and recommends that both industry and government must act in concert. Spelling out the roles for both, it concludes that we need a national policy to improve fixed-line infrastructure more rapidly than the current market-based approach does, as well as satellite-based communications.

The report recommends this because advanced economies have broadband on widespread fixed-line networks, and many are pursuing strategies to further empower their citizens through state action, as before. The effects are many, but let’s start with examining costs. Figure 1 shows the relative cost of broadband in a sample of countries.

India seems favourably placed with its low purchasing power parity (PPP) cost. However, relative to costs in India, this is about 6 per cent of average monthly gross national income (GNI) per capita, ranked 78th, as shown in Figure 2. In comparison, the first 23 countries — Macao, Israel, Hong Kong, the US, Singapore, etc., Greece and Spain included — have costs below or close to 1 per cent; the next 16 have costs below 2 per cent. As the 39 countries have PPP costs of only 0.25 per cent to twice India’s cost, India’s cost as a percentage of its GNI is six times theirs, i.e. Indian users have to pay relatively more. Increasing GNI, while desirable, is harder, more complex, and will take much longer. By contrast, costs can be reduced quickly by sharing network resources and limiting government collections to a reasonable percentage of revenues, instead of auctions and arbitrary levies.

Broadband leaders

Wired Asian countries like Japan, Hong Kong and South Korea already offer broadband on the next generation of high-speed networks. Singapore’s approach especially should be of interest to India, with policies supporting a blend of public subsidies and private investment, while separating three activities: infrastructure, network operations (wholesale), and user services (retail).2

Two years ago, Singapore set out to create an environment with more open access to downstream operators by separating the building of infrastructure from the running of the network. It drew on the experience of local community networks in countries like Britain, France, the Netherlands and Sweden. Three Singapore companies partnered with Axia Netmedia, a Canadian broadband company, to form a consortium called OpenNet, the infrastructure operator. OpenNet uses one partner’s existing network (SingTel’s) as a base. With a government grant of 750 million Singapore dollars, OpenNet is building an extensive fibre-to-the-home (FTTH) grid to be completed by 2012. The second partner is a subsidiary of Singapore Power, SP Telecommunications, which leverages Singapore Power’s experience in developing infrastructure. The third, Singapore Press Holdings, is a leading media services company.

The network operator, a subsidiary of StarHub (a cable and phone operator), is Nucleus Connect. Residential services at 100 mbps have been announced, to be provided by over 10 retail service operators. While some analysts opine that increased competition may not lead to appreciable cost reduction, Singapore is already ranked fifth-lowest in cost as a percentage of average monthly GNI per capita.

Can India do some catching up?a) Can India do something similar? Don’t we need to? How?

The answer to the first question is: only if the government decides on a concerted drive.

To the second: yes, to be competitive.

To the third: with a comprehensive, integrated systems approach. It is insufficient if only one or a few ministries and agencies are involved, because the development and execution of solutions require cutting across turf boundaries. The conventional approach of the ongoing Trai consultation followed by recommendations addressed by the DoT is simply inadequate, because their charter is too limited. Many issues concerning commercial and user decisions, particularly of government agencies and the Department of Defence, and radical changes in approach need active participation from these players as well as the private sector for resolution. Examples are Booz & Co’s recommendations of a better fixed-wire network, and satellite communications in the Ka band, or the possibility of exploiting the cable and satellite TV network of around 110 million households. The entire communications network, or at least the backbone, needs to be shared for efficiency, unlike the existing limited tower-sharing. Also, state governments need to be closely involved in issues like Rights of Way and user needs.

b) Governments at the Centre and all states need to facilitate the productivity of their citizens, instead of hamstringing them with taxes, levies, auctions and dysfunctional policies. This is more easily said than done, with our predatory history, fractious coalitions at the Centre and states, and freewheeling, combative state governments. Governments at all levels have to coordinate this problem-solving initiative for all stakeholders, adapting the experience of leading broadband countries, instead of predatory behaviour seeking personal gains. The consultative process needs to agree on goals, and then figure out practical ways to achieve them.

c) With inspired leadership and a constructive approach, half of the over Rs 1,00,000 crore from the 3G and BWA auctions could support a broadband gambit drawing on concepts like Singapore’s public-private partnership, instead of being just a damaging revenue-collection exercise. Again, easier said than done, but with result-oriented, strong leadership to elicit enlightened employee engagement, even MTNL and BSNL could be partners in a core network in a role like SingTel’s. A public-private network-builder can draw on the combined strengths of its participants to provide a platform for a number of private operators. Separating the infrastructure building and operations from wholesale network services and end-user services could make this feasible and practicable.

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